24th Oct 2007 07:01
Kazakhmys PLC24 October 2007 Kazakhmys PLC Production Summary for nine months and the third quarter ended 30 September 2007 • Total copper cathode production of 277.1* thousand tonnes for the first nine months of 2007, 6% lower than the same period of 2006. - Total copper cathode output declined 5% in Q3 from the previous quarter, to 86.7 thousand tonnes, with production of cathodes from own concentrate increasing by 8% to 85.9 thousand tonnes, benefiting from the processing of stockpiled material. • By-product production generally reflected the lower level of ore output: - Zinc in concentrate production was 101.2 thousand tonnes over the first nine months of 2007, a decrease of 6% compared to the same period in 2006. - Gold production from own concentrate increased by 3% while silver production declined by 7%, compared to the first 9 months of 2006. • Equipment availability and efficiency continues to affect output; although improvements are being seen in several areas, this remains an area of management focus Oleg Novachuk, Chief Executive Officer, said "As mentioned in our productionupdate earlier this month, output has dropped over the past quarter and while wewill endeavour to raise production in the last few months of the year, coppercathode production from own ore in 2007 is likely to be moderately below thelevel of 2006. Management is focused on maximising the efficiency of theexisting operations along with delivering our various growth projects and I lookforward to updating on these matters at the 2007 preliminary results". * Excludes tolled material For further information please contact:--------------------------------------------------------------------------------John Smelt, Head of Corporate Communications Tel: +44 20 7901 7882 Tel: +44 787 964 2675 Sergei Stephantsov, Investor Relations Manager Tel: +44 20 7901 7814Kazakhmys PLC================================================================================Robin WalkerFinsbury Tel: +44 20 7251 3801-------------------------------------------------------------------------------- Notes to Editors Kazakhmys PLC is the largest copper producer in Kazakhstan and one of theleading copper producers in the world. Kazakhmys is a fully integrated copperproducer from mining ore through to the production of finished copper cathodeand rod. The Group produces significant volumes of other metals as by-products,including zinc, silver and gold. Existing operations include 19 open pit andunderground mines, 9 concentrators, two copper smelting and refining complexes,a copper rod plant, a zinc plant and a precious metals refinery. Production isbacked by a captive power supply and significant rail infrastructure. Kazakhmysalso owns MKM, a copper products fabrication company in Germany, and has Goldand Petroleum Divisions with assets in Kazakhstan and Central Asia. The Group'sstrategic aim is to diversify and participate in the development of thesignificant natural resource opportunities in Central Asia. Copper--------------------------------------------------------------------------------Kazakhmys Group Copper Production 9m 9m Q3 Q2 Q3 2007 2006 2007 2007 2006--------------------------------------------------------------------------------Ore extraction '000 t 26,236 30,255 8,242 9,063 10,128--------------------------------------------------------------------------------Average copper grade % 1.21 1.12 1.21 1.18 1.16--------------------------------------------------------------------------------Average zinc grade(1) % 3.77 4.23 3.96 3.67 4.75----------------------------------------------------------------------------------------------------------------------------------------------------------------Copper in Concentrate '000 t 293.1 314.0 91.6 96.8 111.4--------------------------------------------------------------------------------own concentrate '000 t 263.1 283.6 80.3 89.3 100.1--------------------------------------------------------------------------------purchased concentrate '000 t 30.0 30.5 11.3 7.5 11.3----------------------------------------------------------------------------------------------------------------------------------------------------------------Copper Cathodes(2) '000 t 278.2 295.2 87.0 91.5 107.3--------------------------------------------------------------------------------own concentrate '000 t 249.5 265.5 86.0 79.7 96.5--------------------------------------------------------------------------------purchased concentrate '000 t 27.6 28.1 0.7 11.6 10.6--------------------------------------------------------------------------------tolling concentrate '000 t 1.1 1.7 0.3 0.2 0.3--------------------------------------------------------------------------------Copper Rod '000 t 26.9 22.4 9.0 9.0 8.1--------------------------------------------------------------------------------1 Complex ores only2 Includes copper used to produce copper rod Ore extraction in Q3 2007 was 9% lower than in the previous quarter, at 8.2million tonnes, and 19% below the same period of 2006. This was mainly due tothe impact of reduced output at Kounrad mine in the Balkhash region, and loweroutput from Zhezkazgan, including the previously announced flooding at Southmine, which occurred in September. Output in the Karaganda and East regions wasslightly down over the quarter, with Kosmurun mine (Karaganda) maintaining itsstrong performance over the nine months compared to 2006 and reaching itsprojected capacity. Copper grades in the first 9 months of 2007 have continued to be higher than inthe corresponding period of 2006, increasing from 1.12% to 1.21% primarily dueto the benefits of the Group's newer mines, such as Zhomart mine (Zhezkazgan),and lower output from Kounrad (Balkhash). The effects of higher average oregrade partially offset lower ore extraction. The availability of spare parts in particular for hauling and loading equipment,mentioned in earlier production reports, and partly a consequence of high miningand infrastructure activity in the region, had an adverse impact at severalmines. Increased lead times for the delivery of new equipment have beenexperienced in most areas and combined with equipment availability are anincreasing focus for management. As mentioned in previous production reports, the majority of the Zhezkazganmines are at a mature stage and, as a result, considerable work in efficienciesand expansions is being carried out in order to maintain current output levels.In the medium term this will be balanced by a series of small developmentprojects in Zhezkazgan region, such as Sary-Oba, and Taskura, and an increase inproduction volumes in the Karaganda region with new mine developments, such asAkbastau, North Nurkazgan and West Nurkazgan underground. There have been some delays in completing the construction of new concentratorsand concentrator upgrades. Nurkazgan concentrator is currently in commissioningand is expected to ramp up to full capacity of 4,000 thousand tonnes towards theend of H1 2008. This will then be able to take advantage of some 1.4 milliontonnes of stockpiled ore. At the Karagaily concentrator, final technological tests are being carried outto maximise metal recoveries from complex copper-zinc ores. Some stockpiledmaterial at Karagaily is likely to be processed at Nikolayevsky concentratorfrom October, where an upgrade was completed in September. The total production of copper cathode in the first 9 months of 2007 was 6%lower than the same period of 2006, at 277.1 thousand tonnes. Total cathodeoutput in Q3 2007, at 87.0 thousand tones, was primarily reduced due tosignificantly lower volumes of output from purchased concentrate Inventories ofpurchased concentrate have increased at Balkhash smelter, which underwentmaintenance work in September 2007, and this material is likely to be processedin Q4 2007. Copper cathode production from own concentrate increased by 8% in Q32007 primarily due to processing of inventory, which was reduced by 5.9 thousandtonnes. By-products--------------------------------------------------------------------------------Kazakhmys Group By-products Production 9m 9m Q3 Q2 Q3 2007 2006 2007 2007 2006--------------------------------------------------------------------------------Zinc in Concentrate '000 t 101.2 107.1 30.0 32.6 36.6--------------------------------------------------------------------------------Zinc Metal '000 t 33.1 45.9 5.7 12.5 12.1----------------------------------------------------------------------------------------------------------------------------------------------------------------Silver '000 oz 14,840 15,993 4,730 5,089 5,301--------------------------------------------------------------------------------own production '000 oz 14,830 15,954 4,726 5,087 5,295--------------------------------------------------------------------------------tolling '000 oz 10 39 3 2 6----------------------------------------------------------------------------------------------------------------------------------------------------------------Gold '000 oz 103.2 120.6 32.6 36.6 42.9--------------------------------------------------------------------------------own production '000 oz 81.2 79.2 29.8 32.2 25.6--------------------------------------------------------------------------------tolling '000 oz 22.0 41.4 2.8 4.4 17.3-------------------------------------------------------------------------------- The production of zinc in Q3 2007 reflects a similar pattern to that seen in thefirst six months of the year. Lower zinc grades and lower volumes of zinccontaining ores being extracted in the East region have led to zinc inconcentrate production of 101.2 thousand tonnes, 5% lower than in the first 9months of 2006. Production of zinc in concentrate was principally affected bylower output from Orlovskoe mine, due to equipment issues, and lower grades atArtemyevskoe (both East region). Zinc metal output is below the current annualised capacity of 60 thousandtonnes, which should be partially balanced in Q4 of 2007, when the lower outsidetemperatures should allow the plant to operate more efficiently. The sale ofzinc concentrate, as opposed to finished metal, remains attractive. In the third quarter of 2007, 32.6 thousand ounces of gold was produced, adecrease of 11% from the second quarter of 2007. 29.8 thousand ounces wasproduced from own concentrate, a 7% decrease compared to the second quarter of2007. Q3 2007 gold production was 16% higher than in the corresponding period of2006 due to higher gold grades at the East Region (primarily Orlovskoe andYubileino-Snegerihinskoe mines) and Kosmurun mine in the Karaganda region. TheAbyz mine stopped production for stripping works in October 2006. The mine isexpected to resume production in early 2008. 4.7 million ounces of refined silver was produced in Q3 2007, of which, only 3thousand ounces was produced under tolling arrangements. The decline of 11% fromQ3 2006 is mainly due to lower ore production and silver grade in Zhezkazgan.Silver production from own material in Q3 reduced 7% to 4.7 million ounces,compared to Q2 2007. This was principally due to lower processing of stockpiledmaterial, which reduced by just 314.7 thousand ounces to stand at 3.5 millionounces at the period end. Review by region--------------------------------------------------------------------------------Zhezkazgan Complex 9m 9m Q3 Q2 Q3 2007 2006 2007 2007 2006--------------------------------------------------------------------------------Ore extraction '000 t 18,602 21,120 5,786 6,516 7,071--------------------------------------------------------------------------------Average copper grade % 0.81 0.81 0.81 0.80 0.79--------------------------------------------------------------------------------Copper Concentrate '000 t 368.2 412.2 121.0 126.4 132.1--------------------------------------------------------------------------------Copper in Concentrate '000 t 135.7 149.6 42.6 46.6 48.7--------------------------------------------------------------------------------Copper Cathodes(1) '000 t 138.5 165.6 44.7 43.9 59.8--------------------------------------------------------------------------------of which tolling '000 t -- 0.5 -- -- 0.2--------------------------------------------------------------------------------Copper Rod '000 t 26.9 22.4 9.0 9.0 8.0--------------------------------------------------------------------------------1 Includes copper used to produce copper rod Ore extraction at the Zhezkazgan complex in the first 9 months of 2007 was 12%lower than in corresponding period of 2006. The reported accident at the South mine, which took place on 9 September 2007,has resulted in flooding in two mine shafts, which prevented the removal ofmined ore. South mine produced just 109 thousand tonnes in September 2007compared to a year to date average monthly production of 500 thousand tonnes.The damage caused by the flood is now being rectified and the mine is expectedto resume full operation by the end of the year. Annual comparisons are also influenced by continued lower production volumes atAnnenskoe mine following the previously reported roof fall in late 2006 whichrequired extensive mining works to overpass the rockfall area. Compared to Q22007, production volumes were also lower at Zhomart and Stepnoe mines due to theissues with conveyor, loading and haulage equipment. North mine is waiting forthe delivery of drilling, excavator and transportation equipment, which shouldallow a recovery in production. Copper cathode production was marginally higher with a 2% increase compared toQ2 2007 as there was the impact of moderate smelter maintenance work in theperiod, compared to a 14 day maintenance shutdown at the end of May. There wasalso some benefit from production from inventory. Balkhash Complex 9m 9m Q3 Q2 Q3 2007 2006 2007 2007 2006--------------------------------------------------------------------------------Ore extraction '000 t 1,708 3,538 616 602 1,252--------------------------------------------------------------------------------Average copper grade % 1.05 0.78 0.86 1.08 0.72----------------------------------------------------------------------------------------------------------------------------------------------------------------Copper Concentrate(1) '000 t 140.3 205.2 47.8 51.3 72.1--------------------------------------------------------------------------------Copper in Concentrate '000 t 23.7 34.6 7.8 8.3 10.3--------------------------------------------------------------------------------Copper Cathodes '000 t 139.7 128.6 42.2 47.6 47.5--------------------------------------------------------------------------------of which tolling '000 t 1.1 1.0 0.3 0.2 0.1--------------------------------------------------------------------------------Copper Rod '000 t -- -- -- -- ---------------------------------------------------------------------------------- Ore extraction at the Balkhash complex is below that of 2006, due to thecontinuation of planned stripping works at Kounrad mine. In the first 9 monthsthe region's production was down to 1.7 million tonnes of ore, compared to 3.5million tonnes in the corresponding period of 2006. In the first 9 months of2006 Kounrad produced 1.9 million tonnes of ore compared to 0.4 million tonnesin same period for 2007, most of which was in Q3. It is likely that thestripping works will continue through much of 2008 with some intermittentaccompanying ore extraction during this period. The issues regarding drillingand underground loading and transportation equipment at Sayak mine, mentioned inthe Q1 and Q2 production reports, still have not been fully rectified andresulted in a 253 thousand tonnes decrease in ore extraction volumes in thefirst 9 months of 2007 compared to the corresponding period of 2006. Sayak and Kounrad mines have grades below the region's average, so that theirreduced output raised the average region's copper grade for the period from0.78% in the first 9 months of 2006 to 1.05% in the same period of 2007. In Q32007 copper grades were lower than in Q2 2007, due to lower copper grades atShatyrkul mine, caused by higher dilution rates. Copper cathode production declined from 47.6 thousand tonnes in Q2 2007 to 42.2due to refurbishment at one of the two furnaces in August-September 2007. Thereare no major overhauls planned at Balkhash complex furnaces in Q4 2007. East Region 9m 9m Q3 Q2 Q3 2007 2006 2007 2007 2006--------------------------------------------------------------------------------Ore extraction '000 t 3,134 3,393 961 1,027 1,075--------------------------------------------------------------------------------Average copper grade % 2.74 2.78 3.07 2.50 3.09----------------------------------------------------------------------------------------------------------------------------------------------------------------Copper Concentrate(1) '000 t 358.8 259.5 127.4 105.2 127.4--------------------------------------------------------------------------------Copper in Concentrate '000 t 68.1 74.1 24.4 20.0 26.5--------------------------------------------------------------------------------Copper Cathodes '000 t -- -- -- -- ----------------------------------------------------------------------------------Copper Rod '000 t -- -- -- -- ----------------------------------------------------------------------------------1 Excludes concentrate processed by third parties Ore extraction at the East region in the first 9 months of 2007 was lower thanin the same period of 2006 primarily due to lower production volumes atOrlovskoe, Nikolayevskoe, Belousovskoe and Irtyshskoe mines. This was mainly dueto equipment availability issues. Ore extraction in Q3 2007 was lower than in Q2 2007 due to lower productionvolumes primarily at Artemyevskoe mine, partially offset by growth in output atOrlovskoe and Yubilein-Snegirihinskoe mines. Lower production at Artemyevskoemine was caused by changes in geological conditions and a shift in oreextraction towards the copper-zinc ore rather than polymetalic ores. Output wasalso reduced by the ramp up of the Nikolayevskoe concentrator after the recentupgrade, which will improve processing of polymetalic ores internally. Lower ore output was more than offset by improved grades, primarily due toOrlovskoe mine, where copper grade approached 6.00% in Q3, and atYubileino-Snegerihinskoe mine with an average grade of 3.51% in Q3. This allowedcopper in concentrate production to increase by 22%, to 24.4 thousand tonnes,compared to the previous quarter. Karaganda Region 9m 9m Q3 Q2 Q3 2007 2006 2007 2007 2006--------------------------------------------------------------------------------Ore extraction '000 t 2,792 2,204 880 917 730--------------------------------------------------------------------------------Average copper grade % 2.27 2.13 2.07 2.46 2.72----------------------------------------------------------------------------------------------------------------------------------------------------------------Copper Concentrate '000 t 192.7 136.9 34.0 79.5 65.7--------------------------------------------------------------------------------Copper in Concentrate '000 t 29.1 18.0 4.5 12.0 11.6--------------------------------------------------------------------------------Copper Cathodes '000 t -- -- -- -- ----------------------------------------------------------------------------------Copper Rod '000 t -- -- -- -- ---------------------------------------------------------------------------------- Ore production at Karaganda region increased from 2.2 million tonnes in thefirst 9 months of 2006, to 2.8 million tonnes in the corresponding period of2007. This was mainly due to higher production at Kosmurun mine, which increasedby 685 thousand tonnes reaching its projected capacity. The increase was partlyoffset by the closure of Abyz mine, for planned stripping works, which hadproduced 209.8 thousand tonnes of ore in the first nine months of 2006. In July 2007 the new Akbastau mine, situated next to the Kosmurun mine,commenced its first production of 40 thousand tonnes. The mine is expected toramp up to more consistent production in 2008. Average copper ore grades for the first 9 month period of 2007 showed furtherimprovement compared to the corresponding period of 2006 due to the highercontribution of the rich grade ores of Kosmurun mine relating to its ramping upproduction and the absence of production at Abyz mine, which has below averagecopper grades. In Q3 2007 the average copper grade decreased primarily due tolower copper grades of Kosmurun copper-zinc ores. 1.4 million tonnes of Nurkazgan ore containing around 16.8 thousand tonnes ofcopper was stockpiled during the period and is expected to start being processedin Q4. The new Nurkazgan concentrator should start production more fully inNovember, moving towards monthly capacity of 150 thousand tonnes and reachingfull capacity from the beginning of the next year. Stockpiles of material maywell be processed through the Nikolayevskoe and Balkhash concentrators over thecoming months, the former being able to deal with the copper-zinc complex ores. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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